“made in the usa” claims: a marketer’s guide made in usa slides.pdf · “made in the usa”...

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Washington, D.C. ● Brussels ● San Francisco ● Shanghai ● Paris

Alissa D. Jijon+ 1 [email protected]

Laura D. Venker+ 1 202.434.4129

[email protected]

“Made in the USA” Claims:A Marketer’s Guide

April 29, 2015

Keller and Heckman LLP1001 G Street NW, Suite 500 West

Washington, DC 20001

mailto:[email protected]


│ www.khlaw.com │ KELLER AND HECKMAN LLP2 Copyright © 2015

Preliminary Word

This presentation provides information about thelaw. Legal information is not the same as legaladvice, which involves the application of law to anindividual's specific circumstances and dependson many factors. This presentation is not intendedto provide, and should not be relied upon as, legaladvice.

The information provided in this presentation isdrawn entirely from public information. The viewsexpressed in this presentation are the authors’alone and not necessarily those of the authors’clients.


Presenters

Alissa D. Jijon practices in the area of food anddrug law. She advises food, dietary supplement,medical device, consumer product, andpharmaceutical clients regarding compliance withU.S. state and federal regulations, as well asinternational requirements.

Ms. Jijon has counseled clients on theapplicability of laws and regulations enforced bythe Food and Drug Administration, the FederalTrade Commission, the Department ofAgriculture, the Environmental Protection Agency,and the Consumer Product Safety Commission.


Presenters

Laura D. Venker practices in the areas of foodand drug law and international trade. She advisesfood, drug, medical device, cosmetic, alcoholicbeverage, and consumer product clientsregarding compliance with U.S. state and federalregulations, as well as international requirements.

Ms. Venker has counseled clients on theapplicability of laws and regulations enforced byU.S. Customs and Border Protection, theCommerce Department, the Federal TradeCommission, the Food and Drug Administration,the Department of Agriculture, and the ConsumerProduct Safety Commission.

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The Essentials


What is a “Made in the USA” Claim?

A voluntary statement intended to emphasizea product’s American content*

A marketing claim, not a regulatoryrequirement

Distinct from Country of Origin Marking

* Exception: Federal law requires the disclosure of U.S.content on automobiles and textile, wool, and fur products.


Not to be confused with…

Textile Fiber Products Identification Act

• Mandatory labeling of textile fiber products withthe name of the country where the product wasprocessed/manufactured.

• Textile fiber products made completely in theUnited States must be labeled as “Made in USA”or equivalent.


Claim Examples

“Product of USA”

“American-Made”

“USA”

“True American Quality”


Country of Origin Marking

In general, U.S. Customs and BorderProtection requires every article of foreignorigin to be marked with its country of origin.

Marking is not required under Customs rulesfor:

• Articles made in the U.S. exclusively from U.S.-origin components; or

• Articles where the foreign content is “substantiallytransformed” by processing in the U.S.


Substantial Transformation?

“Substantial transformation” is a conceptassociated only with Country of OriginMarking requirements.

“Substantial transformation” does not converta product into a “Product of the USA” for thepurpose of a “Made in the USA” claim.


U.S. Origin = “Made in U.S.A.”, right?

Not necessarily!

• “[W]hether an article may be marked with thephrase ‘Made in the USA’ or similar wordsdenoting U.S. origin, is an issue under theauthority of the Federal Trade Commission(FTC). We suggest that you contact the FTCDivision of Enforcement . . . on the propriety ofproposed markings indicating that an article ismade in the U.S.” (emphasis added)Customs Ruling N257814, October 21, 2014.

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Regulators and Regimes


Federal Trade Commission (FTC)

Key federal guidance is the FTC’s“Complying with the Made in USA Standard,”available at: https://www.ftc.gov/tips-advice/business-center/guidance/complying-made-usa-standard

Bottom line: “All or virtually all” productcontent must be of U.S. origin and finalprocessing/assembly must occur in U.S.

https://www.ftc.gov/tips-advice/business-center/guidance/complying-made-usa-standard




“All or Virtually All”

“All or virtually all” means that all significantparts and processing that go into the productmust be of U.S. origin.

“[T]he product should contain no – ornegligible – foreign content.”


Claim Substantiation

Substantiation for “Made in USA” claimrequires a “reasonable basis” to support theclaim at the time that it is made.

A manufacturer or marketer must have“competent and reliable evidence” to back upits claim.

Note: FTC does not pre-approve claims.


Weak Links in the Supply Chain?

Manufacturers and marketers should notassume components purchased in the U.S.are 100% U.S.-made.

But manufacturers can rely on informationprovided by suppliers regarding origin ofcomponents.

• Know your suppliers and know yourmarket.


FTC Policy Basics

FTC policy applies to all products advertised orsold in the U.S. (with the exception of thosesubject to specific U.S. content labelingrequirements, e.g., automobiles, clothing, furs)

FTC policy applies to all claims, whetherexpress or implied:

• Express: “Made in USA”; “American-Made”

• Implied: Romance copy emphasizing the “trueAmerican quality” of the company’s work


California

Under CA law, a product may not bear a“Made in USA” claim or “similar words” –when the “merchandise or any article, unit, orpart thereof, has been entirely orsubstantially made, manufactured, orproduced outside of the United States.” Cal.Bus. & Prof. Code § 17533.7

Bottom line: Zero tolerance for foreigncontent or processing.


Claim Requirements

Country of OriginMarking

“Made in the USA” Claims

FTC California

Not required whereproduct is:

(1)made in the U.S.exclusively from U.S.-origin components; or

(2) “substantiallytransformed” byprocessing in the U.S.

“Made in the USA”claim permittedonly if product is“all or virtually all”made in the U.S.

“Made in the USA”claim permitted only ifno article, unit, or partof the product has beenentirely or substantiallymade, manufactured, orproduced outside of theU.S.

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The Claim Game


The Risks – FTC Enforcement

Investigation and closing letter citingpotentially violative claims and practices

• See, e.g., Letter to A. Gao, Global Syn-Turf, Inc.(March 30, 2015).

• FTC alleged “Made in USA” claims in marketingmaterials implied that all products advertised inthe materials were “all or virtually all” made in theU.S.

https://www.ftc.gov/system/files/documents/closing_letters/made-usa/150330musaclosingltr.pdf




The Risks – FTC Enforcement

Consent agreement restricting ability to makesimilar claims in future

See, e.g., E.K. Ekcessories, Inc. (2013).

FTC alleged company deceived consumers andonline retailers by claiming products thatcontained substantial foreign content were“Made in the U.S.A.”

https://www.ftc.gov/sites/default/files/documents/cases/131021ekcessoriesagree_1.pdf




California Litigation

Pending lawsuits in California courtshighlight the risks attendant to making“Made in USA” claims on product with anyforeign content.


California Litigation – Air Ball

2014: A manufacturer and a major retailersettled a class action lawsuit net andsome bolts of basketball hoop wereallegedly not U.S. origin.

• Hecht-Nielsen et al. v. Lifetime ProductsInc., et al., and Afrouznia et al. v. LifetimeProducts Inc., et al., Case No. 37-2011-00089380-CU-BT-CTL (2014).


California Litigation – Claims Unravel

2014: Plaintiffs sued clothingmanufacturers and major retailersfabric, thread, rivets, buttons, and zipperparts of jeans allegedly manufacturedoutside of the U.S.

• Clark v. Citizens of Humanity LLC et al.,Case Number 3:14-cv-01404 (pending).

• Paz v. Adriano Goldschmied et al., CaseNumber 3:14-cv-01372 (pending).


California Litigation – Sour Hops?

2015: Plaintiffs sued a major beerproducer beverages allegedly producedusing imported hops.

• Nixon v. Anheuser-Busch, LLC, CaseNumber CGC-15-544985 (pending).


Tricks

Qualified Claims

• FTC Guidelines expressly permit appropriatelyqualified “Made in USA” claims, e.g., “Made inUSA of U.S. and imported parts”; “Couchassembled in USA from Italian Leather andMexican Frame.”

• California statute provides no clear guidance onqualified claims, but pending apparel casessuggest such claims are permissible.


Traps

Use of terms such as “produced,” “created,”or “manufactured” to limit “Made in USA”claim to a specific process

• Such terms likely convey the idea that the claimis more general in scope.

Representations about entire product lines

• Making a general line claim (“Our products aremade in the USA”) when only some productsmeet the “all or virtually all” standard for theclaim.


Traps (cont’d)

Third-party certification

• 2014: Made in the USA Brand,LLC entered into settlement withFTC related to company’sissuance of a “Made in USA”certification seal without eitherverifying the country of origin ofcustomers’ products bearing theseal or clearly disclosing thatcustomers were self-certifying.

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The Road Ahead


The Future of “Made in USA” Claims

Resolution of the pending California cases• Will courts uphold truly “zero tolerance” under CA

law?

• Will qualified claims be the subject of futurechallenges?

How does CA’s standard apply to products thatare manufactured with the aid of foreigncontent, but in which foreign content is removedor undetectable post-production?• Processing aids, enzymes, catalysts, and other

“components” that do not necessarily end up infinished products.

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Questions?

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Thank you

Keller and Heckman LLP1001 G Street NW

Suite 500 WestWashington, DC 20001

Alissa D. Jijon+ 1 [email protected]

Laura D. Venker+ 1 202.434.4129

[email protected]



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